Poverty Changes

£14,000 is quite a large amount of money. Enough for 70,000 Freddos, a decade’s worth of holidays, two new Nissan Pixo’s, several thousand potatoes or a gold standard racing pigeon. However, if you’re trying to live off just that amount in modern Britain, it quickly seems quite a lot smaller. Half of that could easily disappear on rent, whilst the average British family will spend a further £4,000 on food (significantly greater than the European average, for one reason or another). Then we must factor in tax, work-related expenses, various repair bills, a TV license, utility & heating bills, petrol money and other transport expenses, and it quickly becomes apparent that trying to live on this amount will require some careful budgeting. Still, not to worry too much though; it’s certainly possible to keep the body and soul of a medium sized family together on £14k a year, if not absolutely comfortably, and in any case 70% of British families have an annual income in excess of this amount. It might not be a vast amount to live on, but it should be about enough.

However, there’s a reason I quoted £14,000 specifically in the figure above, because I recently saw another statistic saying that if one’s income is above 14 grand a year, you are one of the top 4% richest people on planet Earth. Or, to put it another way, if you were on that income, and were then to select somebody totally at random from our species, then 24 times out of 25 you would be richer than them.

Now, this slightly shocking fact, as well as being a timely reminder as to the prevalence of poverty amongst fellow members of our species, to me raises an interesting question; if £14,000 is only just about enough to let one’s life operate properly in modern Britain, how on earth does the vast majority of the world manage to survive at all on significantly less than this? More than 70% of the Chinese population (in 2008, admittedly; the rate of Chinese poverty is decreasing at a staggering rate thanks to its booming economy) live on less than $5 a day, and 35 years ago more than 80% were considered to be in absolute poverty. How does this work? How does most of the rest of the world physically survive?

The obvious starting point is the one stating that much of it barely does. Despite the last few decades of massive improvement in the living standards and poverty levels in the world in general,  the World Bank estimates that some 20% of the world’s populace is living below the absolute poverty line of surviving on less than $1.50 per person per day, or £365 a year (down from around 45% in the early 1980s- Bob Geldof’s message has packed a powerful punch). This is the generally accepted marker for being less than what a person can physically keep body and soul together on, and having such a huge proportion of people living below this marker tends to drag down the global average. Poverty is something that the last quarter of the century has seen a definitive effort on the part of humanity to reduce, but it’s still a truly vast issue across the globe.

However, the main contributing factor to me behind how a seemingly meagre amount of money in the first world would be considered bountiful wealth in the third is simply down to how economics works. We in the west are currently enjoying the fruits of two centuries of free-market capitalism, which has fundamentally changed the way our civilisation functions. When we as a race first came up with the concept of civilisation, of pooling and exchanging skills and resources for the betterment of the collective, this was largely confined to the local community, or at least to the small-scale. Farmers provided for those living in the surrounding twenty miles or so, as did brewers, hunters, and all other such ‘small businessmen’, as they would be called today. The concept of a country provided security from invasion and legal support on a larger scale, but that was about it; any international trade was generally conducted between kings and noblemen, and was very much small scale.

However, since the days of the British Empire and the Industrial Revolution, business has got steadily bigger and bigger. It started out with international trade between the colonies, and the rich untapped resources the European imperial powers found there, moved on to the industrial scale manufacture of goods, and then the high-intensity sale of consumer products to the general population. Now we have vast multinational companies organising long, exhaustive chains of supply, manufacture and retail, and our society has become firmly rooted in this intense selling international economy. Without constantly selling vast quantities of stuff to one another, the western world as we know it simply would not exist.

This process causes many side effects, but one is of particular interest; everything becomes more expensive. To summarise very simply, the basic principle of capitalism involves workers putting in work and skill to increase the value of something; that something then gets sold, and the worker then gets some of the difference between cost of materials and cost of sale as a reward for their effort. For this to work, then one’s reward for putting in your effort must be enough to purchase the stuff needed to keep you alive; capitalism rests on the principle of our bodies being X% efficient at turning the food we eat into the energy we can use to work. If business is successful, then the workers of a company (here the term ‘workers’ covers everyone from factory floor to management) will gain money in the long term, enabling them to spend more money. This means that the market increases in size, and people can either sell more goods or start selling them for a higher price, so goods become worth more, so the people making those goods start getting more money, and so on.

The net result of this is that in an ‘expensive’ economy, everyone has a relatively high income and high expenditure, because all goods, taxes, land, utilities etc. cost quite a lot; but, for all practical purposes, this results in a remarkably similar situation to a ‘cheap’ economy, where the full force of western capitalism hasn’t quite taken hold yet- for, whilst the people residing there have less money, the stuff that is there costs less having not been through the corporation wringer. So, why would we find it tricky to live on less money than the top 4% of the world’s population? Blame the Industrial Revolution.

The Land of the Red

Nowadays, the country to talk about if you want to be seen as being politically forward-looking is, of course, China. The most populous nation on Earth (containing 1.3 billion souls) with an economy and defence budget second only to the USA in terms of size, it also features a gigantic manufacturing and raw materials extraction industry, the world’s largest standing army and one of only five remaining communist governments. In many ways, this is China’s second boom as a superpower, after its early forays into civilisation and technological innovation around the time of Christ made it the world’s largest economy for most of the intervening time. However, the technological revolution that swept the Western world in the two or three hundred years during and preceding the Industrial Revolution (which, according to QI, was entirely due to the development and use of high-quality glass in Europe, a material almost totally unheard of in China having been invented in Egypt and popularised by the Romans) rather passed China by, leaving it a severely underdeveloped nation by the nineteenth century. After around 100 years of bitter political infighting, during which time the 2000 year old Imperial China was replaced by a republic whose control was fiercely contested between nationalists and communists, the chaos of the Second World War destroyed most of what was left of the system. The Second Sino-Japanese War (as that particular branch of WWII was called) killed around 20 million Chinese civilians, the second biggest loss to a country after the Soviet Union, as a Japanese army fresh from an earlier revolution from Imperial to modern systems went on a rampage of rape, murder and destruction throughout the underdeveloped northern China, where some war leaders still fought with swords. The war also annihilated the nationalists, leaving the communists free to sweep to power after the Japanese surrender and establish the now 63-year old People’s Republic, then lead by former librarian Mao Zedong.

Since then, China has changed almost beyond recognition. During the idolised Mao’s reign, the Chinese population near-doubled in an effort to increase the available worker population, an idea tried far less successfully in other countries around the world with significantly less space to fill. This population was then put to work during Mao’s “Great Leap Forward”, in which he tried to move his country away from its previously agricultural economy and into a more manufacturing-centric system. However, whilst the Chinese government insists to this day that three subsequent years of famine were entirely due to natural disasters such as drought and poor weather, and only killed 15 million people, most external commentators agree that the sudden change in the availability of food thanks to the Great Leap certainly contributed to the death toll estimated to actually be in the region of 20-40 million. Oh, and the whole business was an economic failure, as farmers uneducated in modern manufacturing techniques attempted to produce steel at home, resulting in a net replacement of useful food for useless, low-quality pig iron.

This event in many ways typifies the Chinese way- that if millions of people must suffer in order for things to work out better in the long run and on the numbers sheet, then so be it, partially reflecting the disregard for the value of life historically also common in Japan. China is a country that has said it would, in the event of a nuclear war, consider the death of 90% of their population acceptable losses so long as they won, a country whose main justification for this “Great Leap Forward” was to try and bring about a state of social structure & culture that the government could effectively impose socialism upon, as it tried to do during its “Cultural Revolution” during the mid-sixties. All this served to do was get a lot of people killed, resulted in a decade of absolute chaos, literally destroyed China’s education system and, despite reaffirming Mao’s godlike status (partially thanks to an intensification in the formation of his personality cult), some of his actions rather shamed the governmental high-ups, forcing the party to take the angle that, whilst his guiding thought was of course still the foundation of the People’s Republic and entirely correct in every regard, his actions were somehow separate from that and got rather brushed under the carpet. It did help that, by this point, Mao was now dead and was unlikely to have them all hung for daring to question his actions.

But, despite all this chaos, all the destruction and all the political upheaval (nowadays the government is still liable to arrest anyone who suggests that the Cultural Revolution was a good idea), these things shaped China into the powerhouse it is today. It may have slaughtered millions of people and resolutely not worked for 20 years, but Mao’s focus on a manufacturing economy has now started to bear fruit and give the Chinese economy a stable footing that many countries would dearly love in these days of economic instability. It may have an appalling human rights record and have presided over the large-scale destruction of the Chinese environment, but Chinese communism has allowed for the government to control its labour force and industry effectively, allowing it to escape the worst ravages of the last few economic downturns and preventing internal instability. And the extent to which it has forced itself upon the people of China for decades, forcing them into the party line with an iron fist, has allowed its controls to be gently relaxed in the modern era whilst ensuring the government’s position is secure, to an extent satisfying the criticisms of western commentators. Now, China is rich enough and positioned solidly enough to placate its people, to keep up its education system and build cheap housing for the proletariat. To an accountant, therefore,  this has all worked out in the long run.

But we are not all accountants or economists- we are members of the human race, and there is more for us to consider than just some numbers on a spreadsheet. The Chinese government employs thousands of internet security agents to ensure that ‘dangerous’ ideas are not making their way into the country via the web, performs more executions annually than the rest of the world combined, and still viciously represses every critic of the government and any advocate of a new, more democratic system. China has paid an enormously heavy price for the success it enjoys today. Is that price worth it? Well, the government thinks so… but do you?